(This article appeared in Journal 26,3, Fall 2021)
An issue that consistently keeps the ethics hotline buzzing is “imputed disqualification.” Imputed disqualification refers to the disqualification of an entire group of affiliated lawyers due to an individual lawyer’s disqualification. Said another way, imputed disqualification occurs when a lawyer’s conflict of interest spreads to and “infects” the rest of the firm, rendering all affiliated lawyers infected with the same conflict. However, some conflicts are more contagious than others, while some are unlikely to spread. Lawyers want to know whether the imputed disqualification rule is applicable to their specific scenario, and if it is, whether it can be avoided by screening the disqualified lawyer.
The principle of imputed disqualification is based on the professional obligation of loyalty that a lawyer owes his clients. Rule 1.10 cmt. [2]. The principle also reflects the presumption that lawyers associated in a law firm share client confidences with each other. For purposes of the duty of loyalty, a firm of lawyers is viewed as essentially one lawyer. “[E]ach lawyer is vicariously bound by the obligation of loyalty owed by each lawyer with whom the lawyer is associated.” Id.
In general, when an individual lawyer in a firm has a conflict of interest based on Rule 1.7 or Rule 1.9, that conflict is imputed to all the lawyers associated with the firm. Rule 1.10(a). There are, however, qualifications and exceptions to the general rule. Whether the imputed disqualification rule applies, and whether it can be avoided by screening, often depends on the relationship that exists between the disqualified lawyer and the other lawyers, and on the reasons for the lawyer’s disqualification.
Lawyers Must Be Associated in a Firm—The first qualification is that conflicts of interest are only imputed to lawyers “associated in a firm.” Comment [1] to Rule 1.10 provides a definition of the term “firm”:
For purposes of the Rules of Professional Conduct, the term “firm” denotes lawyers in a law partnership, professional corporation, sole proprietorship or other association authorized to practice law; or lawyers employed in a legal services organization or the legal department of a corporation or other organization. See Rule 1.0(d). Whether two or more lawyers constitute a firm within this definition can depend on the specific facts. See Rule 1.0, Comments [2] - [4].
Lawyers who are “of counsel” to a law firm are ordinarily considered associated with the firm for purposes of analyzing imputed qualification questions. In contrast, lawyers serving as “co-counsel” with a lawyer employed by a different firm are generally not considered associated with that lawyer’s firm. Whether independent contractors are associated with a firm is a fact-specific determination based upon the terms of the engagement. Lawyers who share office space risk being disqualified from representing adverse parties under Rule 1.10(a) if the lawyers are perceived as practicing together in a law firm.
Conflicts are Not Imputed from Nonlawyers—An exception to the principle of imputed disqualification is that conflicts are generally not imputed from nonlawyers. Comment [4] to Rule 1.10 provides that Rule 1.10(a) “does not prohibit representation by others in the law firm where the person prohibited from involvement in a matter is a nonlawyer, such as a paralegal or legal secretary.” The comment notes, however, that these nonlawyers should be screened from any personal participation in the matter. See RPC 74 and RPC 176 (lawyer who employs paralegal is not disqualified from representing party with interests adverse to that of a party represented by a lawyer for whom the paralegal previously worked, but paralegal should be screened).
A similar analysis applies to work that a lawyer did prior to becoming a lawyer. A conflict of interest of a lawyer based on work the lawyer did while a law student is generally not imputed to all lawyers in the firm. However, these lawyers should also be screened from any personal participation in the conflicting matter. See 2010 FEO 12 (law firm may hire recent graduate although the law firm is representing a client in a matter on which the graduate previously worked for the opposing party while clerking at another firm, but graduate should be screened from any participation in the matter). The purpose of screening is to assure the affected parties that confidential information known by the disqualified individual remains protected. Id.
Personal Conflicts Arising under Rule 1.7 are Not Always Imputed—When a lawyer in a firm cannot represent a client due to a conflict arising from the lawyer’s personal interests, the disqualification does not always extend to other lawyers in the firm. An exception in Rule 1.10(a) eliminates imputation of a lawyer’s personal conflict in situations where the particular conflict does not present a significant risk of materially limiting the client’s representation by the remaining lawyers in the firm. The determining factors are: (1) whether the lawyer’s personal interest would undermine the loyalty of other members of the law firm or (2) pose any threat to client confidences.
Examples of personal conflicts of interest are set out in comments [10] and [11] to Rule 1.7 and include: where the probity of a lawyer’s own conduct is at issue, when a lawyer has employment discussion with an opposing law firm, when a lawyer has related business interests, and where lawyers representing different clients in the same matter are closely related. Comment [11] specifically provides that disqualifications arising from a close family relationship that is personal ordinarily are not imputed. For discussions of imputed conflicts in the context of specific personal conflicts of interests, take a look at 2005 FEO 1 (lawyer appearing before a judge who is a family member), 2016 FEO 3 (lawyer negotiating for employment with a firm that represents a party adverse to the lawyer’s client), and 2019 FEO 3 (lawyer engaging in ongoing sexual relationship with opposing counsel).
Personal Conflicts Arising under Rule 1.8, on the Other Hand, are Always Imputed—Rule 1.8 sets out specific rules pertaining to several personal interest conflicts with current clients, and it contains its own imputation provision. Rules 1.8(a) – (i) address business transactions with clients; using information relating to representation of a client to the disadvantage of a client; soliciting gifts from clients; obtaining literary or media rights; financial assistance to a client; third party payors; aggregate settlements; agreements limiting lawyer liability; and acquiring a propriety interest in a client’s matter. When a lawyer cannot represent a client because of any of these prohibitions, the disqualification is imputed to all associated lawyers. Rule 1.8(j). It is important to note that the imputation provision in Rule 1.8(j) is absolute. There is no requirement that the conflict present a significant risk of materially limiting the client’s representation by the remaining lawyers in the firm.
Exceptions Pertaining to Lawyer Mobility—Imputed conflict issues relating to departing associates and to lateral hires can be confusing. Rule 1.10(b) applies when a lawyer leaves a firm and Rule 1.10(c) applies when a lawyer joins a firm. These two rule sections look at the effect of a lawyer’s departure or a lawyer’s arrival on the other lawyers in the firm.
When a lawyer leaves a firm, he carries his conflicts with him. Under Rule 1.10(b), the firm is not prohibited from thereafter representing a person with interests materially adverse to those of a client represented by the formerly associated lawyer unless two criteria are met. First, the matters must be the same or substantially related to that in which the formerly associated lawyer represented the client. (Rule 1.9, comment [3] provides general guidance in applying the substantial relationship test.) The second part of Rule 1.10(b) requires that some lawyer remaining in the firm possesses information from the prior representation that is protected by Rules 1.6 and 1.9(c) and is material to the current matter. If lawyers currently with the law firm do not have confidential information about the adverse former client, then the former client’s right to confidentiality is not impaired, and the former client is protected. A lawyer possesses confidential information if he participated in the representation of the client, was privy to confidential information because he participated in discussions with the departed lawyer, or the file (paper or electronic) remains at the firm.
When a lawyer joins a firm, he brings his conflicts with him. However, Rule 1.10(c) recognizes “screening” measures as a possible means of avoiding imputed disqualification. Pursuant to Rule 1.10(c), no lawyer in the new firm may represent a person in a matter in which the new lawyer is disqualified under Rule 1.9 unless: (1) the disqualified lawyer is timely screened from the matter; and (2) written notice is promptly given to any affected former client. Comment [4] to Rule 1.9, which relates to lawyers moving between firms, explains the policy considerations justifying the use of screens in this situation:
[w]hen lawyers have been associated within a firm but then end their association, the question of whether a lawyer should undertake representation is more complicated. There are several competing considerations. First, the client previously represented by the former firm must be reasonably assured that the principle of loyalty to the client is not compromised. Second, the rule should not be so broadly cast as to preclude other persons from having reasonable choice of legal counsel. Third, the rule should not unreasonably hamper lawyers from forming new associations and taking on new clients after having left a previous association. In this connection, it should be recognized that today many lawyers practice in firms, that many lawyers to some degree limit their practice to one field or another, and that many move from one association to another several times in their careers. If the concept of imputation were applied with unqualified rigor, the result would be radical curtailment of the opportunity of lawyers to move from one practice setting to another and of the opportunity of clients to change counsel.
Screening allows a lawyer in a law firm to represent a client even though another lawyer in the firm is disqualified because of a conflict of interest. As noted in comment [6] to Rule 1.10, where the conditions of Rule 1.10(c) are met, “imputation is removed, and consent to the new representation is not required.” Screening isolates the disqualified lawyer from any participation in the matter involving the conflict. The primary purpose of screening is to ensure that confidential information known by the disqualified lawyer remains protected. If a law firm can rebut the presumption that the disqualified lawyer has shared or will share the former client’s confidences with other lawyers in the firm, then the firm may be able to avoid imputed disqualification.
Rule 1.0(l) defines “screening” as “the isolation of a lawyer from any participation in a professional matter through the timely imposition of procedures within a firm that are reasonably adequate under the circumstances to protect information that the isolated lawyer is obligated to protect under these Rules or other law.” The comments to Rule 1.0 provide further guidance:
[9] The purpose of screening is to assure the affected parties that confidential information known by the personally disqualified lawyer remains protected. The personally disqualified lawyer should acknowledge the obligation not to communicate with any of the other lawyers in the firm with respect to the matter. Similarly, other lawyers in the firm who are working on the matter should be informed that the screening is in place and that they may not communicate with the personally disqualified lawyer with respect to the matter. Additional screening measures that are appropriate for the particular matter will depend on the circumstances. To implement, reinforce, and remind all affected lawyers of the presence of the screening, it may be appropriate for the firm to undertake such procedures as a written undertaking by the screened lawyer to avoid any communication with other firm personnel and any contact with any firm files or other information, including information in electronic form, relating to the matter, written notice and instructions to all other firm personnel forbidding any communication with the screened lawyer relating to the matter, denial of access by the screened lawyer to firm files or other information, including information in electronic form, relating to the matter, and periodic reminders of the screen to the screened lawyer and all other firm personnel.
[10] In order to be effective, screening measures must be implemented as soon as practical after a lawyer or law firm knows or reasonably should know that there is a need for screening.
2003 FEO 8 (Duties to Prospective Clients) provides a discussion of adequate screening and notice procedures. As to the notice requirement, 2003 FEO 8 provides:
Written notice should be given as soon as practicable after the need for screening becomes apparent and before any confidential information is leaked, even inadvertently, to the other lawyers in the firm. The notice should include a description of the screened lawyer’s prior representation and of the screening procedures employed. Rule 1.18, cmt. [8]. Such procedures may include the following: the screened lawyer will acknowledge the obligation not to communicate with any of the other lawyers in the firm with respect to the matter; other lawyers in the firm will not communicate with the screened lawyer concerning the matter; the firm will employ special procedures to ensure the screened lawyer has no contact with other personnel, firm files, or other materials associated with the matter; and there will be periodic reminders of the screen to all members of the firm. Rule 1.0, cmt. [9]
The North Carolina Court of Appeals recently issued an unpublished opinion considering whether a law firm should be disqualified due to an imputed conflict of interest when a former lawyer for the defendant joined the firm representing the plaintiff. Van Kampen v. Garcia, No. COA 20-439, 2021 N.C. App. LEXIS 302 (July 6, 2021). The court held that the firm was not disqualified because the defendant’s former lawyer was promptly screened from the case, never shared any information related to the case with plaintiff’s counsel, and promptly notified defendant of her change of employment. Id. As to the timeliness of the notice, the court found that the notice, which was given 22 days after defendant’s former lawyer changed firms, and after defendant filed a motion to disqualify the lawyer, met the requirements of Rule 1.10(c). Id. As noted by the court:
Rule 1.10(c) does not establish a bright line rule on the deadline for the provision of the notice it requires, instead simply requiring that the “notice [be] promptly given[.]” R. 1.10(c). The implicit premise of Defendant’s argument is that 22 days cannot constitute prompt written notice within the meaning of Rule 1.10(c), which we reject. Whether notice has been promptly given within the meaning of Rule 1.10(c) is a fact specific inquiry, but we hold that the 22-day delay here complied with Rule 1.10(c), particularly for a change of employment by a “very active family law attorney,” as Plaintiff’s counsel represented that both she and Defendant’s former lawyer are.
Id.
Waiver of Disqualification—Rule 1.10(d) provides that imputed disqualification may be waived by the affected client under the conditions stated in Rule 1.7. To wit, the clients must give informed consent confirmed in writing.
Other Rules—Imputed disqualification is also addressed in three other rules. Rule 1.11 addresses the disqualification of private firms that hire former government lawyers. Rule 1.12 speaks to the disqualification of private firms that hire a former judge, judicial law clerk, arbitrator, mediator, or other “third-party neutral.” Rule 1.18 governs disqualification of firms as a result of a lawyer’s discussions with a prospective client. These three rules permit law firms to avoid imputed disqualification by screening the individually disqualified lawyer from any involvement in the matter.
Conclusion
Conflicts of interest are some of the most complicated legal ethics issues a lawyer will face; and the fact that they are “contagious” to other members of a law firm (and can follow a lawyer to his next firm) makes the issue that much more difficult. The rules on imputed disqualification, though, are borne of the critical duty of loyalty lawyers owe to their clients. They serve an important role in ensuring confidential information is protected, in providing notice to those impacted, and in fostering confidence by the public in the legal profession. To diagnose a possible infection by an imputed conflict of interest, lawyers should contact the State Bar’s ethics staff at ethicsadvice@ ncbar.gov. n